Tribunal tribulations - the latest reforms

As most of you will know from the news, Chancellor George Osborne announced some headline reforms on the law of unfair dismissal and the Employment Tribunal system at the recent Conservative Party Conference. The two significant changes announced were the increase in the qualifying period of employment required to bring an unfair dismissal claim from one year to two years with effect from April 2012, and the introduction of fees for claimants wanting to bring claims in the Employment Tribunal.

Since these changes were announced another potential change has been leaked - a Government-commissioned report recommended that the law on unfair dismissal should be scrapped altogether. The basis for this is that it can take a very long time to fairly dismiss an employee on performance grounds, so this should be replaced by a system where the employee is entitled to a lump sum on termination, but has no right to further redress. The Government have sought to distance themselves from the report, and apparently it is very unlikely that the conclusions will be adopted.

The change to the qualifying period is definitely happening, however, and the introduction of fees is highly likely. In this article we look at some of the issues and unanswered questions arising from these changes.

The increase in the qualification period for unfair dismissal claims is aimed at reducing the number of claims by between 3,700 and 4,700 per year. This is a significant number, but needs to be put in context – in 2010 – 2011 there were 47,900 unfair dismissal claims, 9,500 less than the 57,400 filed in 2009 – 2010. The government’s logic in increasing the qualification period is that employers will be more likely to recruit, as they argue that employers see the risk of litigation from former employees is a disincentive to recruitment. In its original consultation paper, Resolving Workplace Disputes: A Consultation, the government stated that the change would not “change the basic principle that an employer must have a fair reason for dismissal and follow a fair process”. Given that the whole point about removing unfair dismissal rights is to allow employers to dismiss without having to find a fair reason or follow a fair process, it is difficult to see how this can be right.

Whilst many employers have welcomed the proposal, others have said that it will put reputable employers at a disadvantage as they will still seek to treat employees fairly, whilst less scrupulous competitors may not. Many employers have also expressed concern that employees who have been dismissed within the first two years of their employment will bring claims for discrimination or some other right which is protected from day one of their employment, such as whistleblowing. These types of claims tend to be more complicated in nature and thus more time consuming and expensive to defend.

Another area of concern with the proposed change is that the whole basis of the proposal could in itself be challenged under existing discrimination legislation. Some will recall that before 1997 the qualification period for bringing claims of unfair dismissal was two years. This was challenged in the courts in the case of R (Seymour-Smith) v Secretary of Statefor Employment[2000] on the basis that the qualification period discriminated against women as fewer women than men were able to achieve two years’ continuous employment as more women had career breaks to raise their children. This principle was accepted by the House of Lords, but a majority of their Lordships considered that this could be justified at the time as a means of increasing recruitment. However, they made the point that while there may have been objective justification in 1991 (which is when the Seymour-Smith case started) for a two year qualifying period, experience of such measures could call for a different assessment at a later point in time, and the government would have to keep the issue under review. Since then we have of course also introduced age discrimination, and it is clear that the requirement to have two years’ service will impact negatively on young people. It will be interesting to see whether claims on the ground of sex and age discrimination are made against the government, and if they are whether the justification accepted by the House of Lords in Seymour-Smith will still be held to apply.

The proposals also leave a number of questions unanswered, and the government is currently consulting on some of these. Probably the main issue is what happens to people who will have between one and two years’ service when the change is introduced. Will they suddenly lose their protection, or will they still enjoy protection, even though they do not have two years’ service?

The other main proposal made by the Chancellor was the introduction of fees for claimants to bring fees in the Employment Tribunals. It is intended that these will be introduced in December 2013. There is no official confirmation of the level of fees proposed, but it is reported that the fee to bring a claim will be £250, with a further £1,000 if the matter proceeds to a hearing. It is also reported that the fees will be higher if the claim is worth more than £30,000 – although as most claims include ongoing losses, it is not clear how this will be assessed. The proposal is that claimants who win will get the fees back – but it is not clear whether that means from the Tribunal service or the respondent. It is also not clear what is meant by winning – if a claimant gets a finding of unfair dismissal, but nil compensation due to their contributory conduct leading to the dismissal, is that a win?

The Chancellor stated that those who were out of work or on low incomes would be exempt from the fees. What that seems to overlook is that the vast majority of claims brought in the Employment Tribunals are from people who have just lost their jobs – that is what their claims are about!

It is also worth mentioning that the Tribunals do not currently have accounts departments used to handling large amounts of money. Last year there were 382,400 claims made to the Employment Tribunals – even allowing for the fact that fees will undoubtedly reduce the number of claims, handling several hundred thousand deposits and possibly returning them in appropriate circumstances will be a major undertaking with which the Tribunals would struggle to cope without significant new resource.

There are other proposals in the original consultation paper which were not mentioned by the Chancellor at the Conservative Party Conference – including one to “fine” employers who lose Tribunal claims. It is proposed that the fine should be 50% of the award made against the employer, paid to the Exchequer, not the claimant. It is proposed that this be subject to a minimum sum of £100 and a maximum of £5,000 – but like a parking ticket, reduced by 50% if paid within 21 days.

It is clear that there is still a lot of detail to be put on to the proposals, and the effectiveness or otherwise of the proposals to help businesses in the current difficult economic climate will to a large extent depend on that detail.

Pure Employment Law will be keeping you abreast of the changes as more information becomes available.

Do you have a question about the forthcoming changes? If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or enquiries@pureemploymentlaw.co.uk)

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.

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